Misleading Food Labels

At Meatingplace.com, Rita Jane Gabbett discussed  one of the questions that came up during the Chicago Food Dialogue event I participated in a couple weeks back. She says:

Part of the debate I found intriguing was whether or not labels should be allowed that, while accurate, also stand a good chance of deceiving or confusing consumers. 

Former USDA Deputy Secretary Kathleen Merrigan was on the panel. She advocated for allowing any label that is accurate.  She said if they want to be able to say their product is harvested only on Tuesday evenings under a full moon, for marketing purposes, they should be able to say that as long as it’s true. 

Others argued against labels that, while accurate, are purposefully deceptive. “Hormone-free poultry” is the classic example. Since it is illegal to use hormones in U.S. poultry production, all fresh poultry is hormone-free. Yet, the label insinuates that perhaps the product’s competitors are not hormone-free.

“Trans fat-free blueberries” is another example. Think about that one for a minute. Then think again if you believe that everyone knows that no fresh blueberries contain trans fat. One farmer on the panel described having a class of students and their teacher visit his farm and it was the teacher who asked, “Now, we know the white eggs come from hens. Do the brown eggs come from roosters?” 

Members of the food industry know that educating consumers is difficult. Is it ever ethical to confuse them on purpose?  I have to disagree with former Deputy Secretary Merrigan on this one.

From a newsroom perspective, it’s not unlike the decisions we make in our news planning meetings every day about headlines. We want you to click on our headlines and read our stories. However, if we headline a story, “Fire breaks out in plant,” and the story ends up to be about a waste can fire in accounting that was put out in 30 seconds with a cup of coffee, we may have gotten your attention, but wouldn’t you think you had been duped? I think we’ve had plenty of examples of how badly consumers can react when they feel they have been duped about the food they eat. Think about it.

We resist the temptation to write accurate, yet misleading, headlines.

I actually wanted to weigh in on this question during the discussion but given that there were nine people on the panel, I had to pick and choose my battles.  

I agree with both Merrigan and Gabbett (if that's possible).  I'm with Merrigan in that companies should be allowed to add (or rather than governments shouldn't be permitted to prevent) any kind of label so long as it is truthful.  Yet, I agree with Gabbett that truthful claims can sometimes be misleading.  Perhaps ironically, however, I do not think such claims should be outlawed for precisely the reason Gabbett says she doesn't write misleading headlines (even though they are not illegal).  Integrity.  

Yes, a food company can probably get away with making a short term profit by fooling some consumers with misleading labels (a hideous and hilarious example is this package of non-GMO salt) .  But, what happens when the truth comes out (as it eventually will) and consumers wise up or when 20/20, 60 minutes, et al. show up at your door pointing out your deception?  

Labeling truthful but implicitly misleading claims is, to me, a sign of a lack of integrity.  We can't legislate morality, and fortunately, the market will (eventually, though not as fast as we always like) damage the reputation and profits of those who act without integrity.   

Gabbett doesn't print stories with misleading headlines, I suspect, because she believes the short-term benefits received do not outweigh the longer-term cost that misleading headlines would cause in terms of the lost trust of her readers.  That doesn't mean some papers or web sites don't mislead; it also doesn't mean some food companies don't deceive.  But rather than legislate against these activities, I'd rather we create a culture in which it is shameful to undertake such activities and in which consumers use their wallets to punish deception.   

The end of an epidemic?

Just like a good story, every epidemic has a beginning, middle, and an end. Lately, we’ve been seeing signs that obesity’s prevalence is leveling. Policy makers who think they have the answer have been declaring that their strategies are working. But it just might be that we were headed here all along.

That's from the blog at conscienhealth.  They were commenting on a new study forthcoming in journal Obesity.  The study projects that:

US prevalence of obesity, overweight, and extreme obesity will plateau by about 2030 at 28%, 32%, and 9%, respectively

One of the reasons is due changes in birth rates, mortality, and age distributions.  The study authors conclude: 

The US prevalence of obesity is stabilizing and will plateau, independent of current preventative strategies.

The bloggers at conscienhealth put it a little differently:

As George Harrison and the Chesire Cat knew, if we don’t know where we’re going, any road will get us there.

Likewise, just about any prevention strategy might seem to work for obesity in the absence of careful analysis.

Here is one interesting graph from the study (actual fitted trends based on historical data are in solid lines, solid circles are CDC data, and dashed curves are simulated projections).

Economic Effects of Environmental Regulation

Jeffry Dorfman, an agricultural economist at the University of Georgia, weighed in on Obama's proposed environmental regulations at Real Clear Markets.  After discussing the fact that the environmental effects are probably smaller and more nuanced than most people expect, the got to the economics of the issue:

First, rising energy prices. A fascinating part of the special-interest coalition that makes up the Democratic Party is how many of its groups have aims which are at odds with another coalition partner. Environmental groups advocate a set of policies that uniformly hurt poor people. Environmental protection is essentially a luxury good. If you have enough money to provide food, clothing, and shelter for your family, then you start to care about the environment.

Krugman and I can both afford to pay a little more on our electricity bill and when we fill up our gas tanks, but those higher energy costs are regressive. Poor people spend a higher percentage of their income on energy bills, so raising those costs in order to improve the environment means that the poor will feel more pain than those with higher incomes. If we were talking about tax policy, no liberal would forget to mention the poor and how the rich should carry more of the burden. Yet, somehow, on environmental policy most liberals favor policies which hurt the very people they normally want to help.

Then he gets into the broken-window fallacy - that somehow by forcing companies to invest in new equipment, everyone can be made better off.  

Now if we build a brand new power plant while continuing to operate all the ones we have, that can lead to economic growth because we are increasing the productive capacity of the economy. But shutting down a plant that is fine in every way except for producing emissions that worry some people is the same as when a natural disaster destroys property. Something that had value no longer exists. The idea that replacing the previous item leads to economic growth is one of the most basic fallacies in all of economics, known as the broken window fallacy.

The Eli Lehrer in the Weekly Standard also had an interesting response to Obama's proposed environmental regulations. Here is one snippet:

Indeed, if free-market conservatives really want evidence of climate change, they ought to look towards the insurance markets that would bear much of the cost of catastrophic climate change. All three of the major insurance modeling firms and every global insurance company incorporate human-caused climate change into their projections of current and future weather patterns. The big business that has the most to lose from climate change, and that would reap the biggest rewards if it were somehow solved tomorrow, has universally decided that climate change is a real problem. An insurance company that ignored climate change predictions could, in the short term, make a lot of money by underpricing its competition on a wide range of products. Not a single firm has done this.

and yet, Lehrer rightly says:

The scientific consensus that exists about the causes and effects of climate change can’t point to an optimal policy solution any more than improvements in heart surgery techniques can provide guidance on health care reform.

Agricultural Policy Distortions

Which sector in the economy accounts for 70% of the global cost of trade distortions but only 3% of global GDP?  Agriculture.    

Kym Anderson, Gordon Rausser, and Jo Swinnen have an excellent review article in the newest issue of the Journal of Economic Literature on agricultural policy worldwide.  They reveal that agricultural markets are among the most distorted in the world, recent price spikes have been amplified by agricultural policies, and some of the poorest people in the world are hurt by agricultural policies in developing and developed countries alike.  

A few of quotes: 

For advanced economies, the most commonly articulated reason to restrict food  trade has been to protect domestic producers from import competition as they come under competitive pressure to shed labor. However, such measures harm not only domestic consumers and exporters of other products but also foreign producers and traders of food products. Accordingly, these measures also diminish national and global economic welfare

and

policies in developing countries have not been motivated by a desire to alleviate poverty in their rural areas (where most of the world’s poor reside) any more than have been the policies of developed countries.

and

In developed countries, agricultural policy remains disproportionately important compared to the relatively small shares of the upstream agriculture component in GDP and employment. For example, the Common Agricultural Policy (CAP) continues to absorb 40 percent of the entire EU budget

The paper is chock full of fascinating figures on trade distortions in agriculture, such as this one on international comparisons of relative rates of assistance (RRA), which measure the policy-induced price distortions in agriculture relative to a country's non-agricultural policy-induced price distortions.  A positive number means a country's policies are pushing up agricultural prices relative to the world price (and relative to non-agricultural sectors); a negative number implies the opposite.  The larger the number in absolute value, the bigger the distortion and thus the larger the misallocation of resources.

What Do Regular People Want Out of the Farm Bill?

One of the things I vividly remember learning in my first class on agricultural policy was that the farm bill is a result of a political compromise.  As the story goes, including food stamps in the farm bill encourages support from urban legislators while the farm support provisions bring in the more rural legislators (farmers benefit from food stamps too by poorer consumers having more money to spend on food).  The farm bill is a grand compromise of sorts - a comprise funded by the taxpayers.

After a long run, it appears this compromise might be breaking down.  Much has been written in the past couple weeks about the defeat of the farm bill in the House.  Here is one decent description at Forbes.com of the politics at play.  In short, Democrats were unhappy with the cuts to food assistance and the introduction of work requirements to get food stamps.  Some deficit-watching Republicans didn't think the cuts went far enough.  It is true that the cuts to food assistance were large in dollar terms (see the graphics in this Washington Post article) but if you place them in terms of a percentage reduction relative to the overall size of the farm-bill budget, they are actually smaller than cuts to some other areas.  The reasons is that food stamps and nutrition programs make up almost 80% of the farm bill budget.  

I've shared my general thoughts on farm programs in chapter 7 of the Food Police but here are a few more.  Although I realize it is probably politically infeasible (although perhaps less so given recent developments), it would seem to make some sense to me to separate the components of the farm bill and see if they can stand on their own.  Those advocating for food-stamp spending should make their case and put the money over in the Department of Health and Human Services.  Those advocating for farm supports should make arguments with merits that stand on their own grounds.  

Right now I'm not going to get into the merits and demerits of the current farm bill.  However, what I don't see reported much is what regular folk think.  A couple years ago, we conducted a survey on exactly this topic and the results are discussed in Choices Magazine, a publication of the Agricultural and Applied Economics Association.  In the survey, we posed the following questions to respondents: "Suppose the USDA gave you $100 to divide among its six budget categories. How much money would you give to each budget category? (If you would not give money to a certain category, please place a zero (0) in its box."  In essence, we asked people to make their own farm-bill budget.  For one group, we gave them information on the spending allocation by the USDA in 2008, for another group we didn't give them any information.  

Although people prefer a lot of support for food assistance (28% or 20% of the budget depending on information) , this is much lower than current farm bill proposed allocation (almost 80%).  Moreover, here are the results from another question, where we simply asked people to indicate which category they thought was most important. 

Far and away, food safety and inspection was seen as most important. 

Now, I'm not saying we should set policy based on these kinds of survey responses (e.g., did people understand the FDA not the USDA handles a lot of the food safety and inspection issues in the country?; We didn't ask if they wanted the size of the pie to be larger or smaller, etc).  But I find them interesting nonetheless.